Treasury bill yields drop as Eurobond addresses debt maturities

Short-term Treasury bill yields fell by 0.5 per cent on Tuesday on expectations the government would sell less debt at auctions in the second quarter after raising $2.5bn via Eurobond.

The government has been working to lower its borrowing costs, particularly as inflation fell for the twelfth time in a row in January. It sold Eurobonds last Thursday to pay off the bills rather than rolling over debt as it has done in the past, according to Reuters.

Nigeria has been switching into dollar debt to lower borrowing costs. It intends to book more loans offshore before 2019 to increase its foreign loans to 40 per cent of total debt from 27 per cent now.

The country plans to source $2.8bn abroad to help finance its 2018 budget, which is still under consideration with lawmakers.

Finance Minister, Kemi Adeosun, said this month that the country would redeem N762.5bn ($2.5bn) worth of treasury bills to reduce the government’s costs.

Traders said the short-dated bill with 60 days to maturity, traded at 14.3 per cent on Tuesday, down from 14.8 per cent in the previous session.

Investors are waiting for the Debt Management Office to announce which bills it intends to pay off and a reduction in auction volumes for second quarter, which could spur buying, according to traders.

The Central Bank of Nigeria, however, has been mopping up liquidity through open market bills to keep rates above inflation.

The medium-term bills with 150-days to maturity, traded at 14.7 per cent on Tuesday, down from 14.9 per cent previously. The longer-dated notes were unchanged at 13.45 per cent, traders said.

Nigeria has a treasury bill portfolio of N2.7tn. It paid off N198bn worth of bills in December, leading to rates dropping by around 300 basis points.